Implementing

the New Lease

Accounting Standard
in SAP Landscapes
The Road to Compliance

Internal Audit, Risk, Business & Technology Consulting

Introduction

A new lease accounting standard will become a requirement for companies starting on
January 1, 2019. This paper provides background on the standard and recommends a
specific technological solution, SAP Lease Administration by NAKISA, for lessees, to allow
for process automation, consistent controls, transparency for lease reporting, and analysis of
asset utilization.

Asset leasing is a common business practice among
companies in all industries. It allows businesses to
utilize real estate, equipment, transportation assets
and technology to support operations and functions
on a day-to-day basis while providing flexibility and
control over working capital. Traditional accounting
rules require leases to be classified as financial (cap-
italized on the balance sheet) or operating (expensed
in the profit and loss [P&L] statement), based on the
intended use and ownership of the underlying asset.
Historically, this provided a structure that allowed
off-balance sheet financing, affecting the company’s
debt and liability posture. To help address this issue
and ensure consistency in financial reporting, the
Financial Accounting Standards Board (FASB) and
the International Accounting Standards Board (IASB)
jointly developed a new standard, ASC 842, as part of
a global convergence effort. This new standard will
require lessees to recognize a lease liability and a right-
of-use asset for all leases (except those with a duration
of less than one year) when the underlying asset
becomes available to the lessee. The introduction of
the new standard requires both lessees and lessors to
evaluate its effect on the business processes, policies,
financial statements, technology and internal controls
within their company.

Lease Accounting Standard Effective Dates

ASC 842 issued Effective Date:

2016 2017 2018 2019
February 25, 2016 January 1, 2019*

Financial Reporting Current Standard New Standard

* Note: Non-public companies have until January 1, 2020 to comply with the new standard.

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Lease Accounting Compliance Considerations

In order to comply with the new lease accounting rules, companies must define a comprehensive approach
and compliance road map that not only include the policies and procedures for processing assets, but also the
technology and automated controls to support the updated accounting practices and comply with reporting
requirements. The table below outlines the key considerations along this process, with guiding questions to
address each consideration.

COMPLIANCE CONSIDERATIONS KEY QUESTIONS

• Do you have a documented accounting policy for leases?

• Do you understand the impact of the accounting standards on your business,
including statutory reporting considerations?
• Have you started to address the new leasing standard?
Understand the new regulation
• Have you evaluated the need for new judgments, estimates and calculation
requirements under the new standard?

• Do you regularly lease property, plant or equipment?

• Approximately how many leases do you have at any given point in time for
each of these categories — property, plant, equipment type (e.g., copiers,
computers, vehicles)?
• Do you know the locations of your current leases?
• Are the majority of the lease terms longer than a year?
• Do you engage in financing arrangements?
• Do you have all the required lease data electronically?
Create an inventory of leases
• Do you have supplier arrangements or service contracts that provide the right
to use certain assets?
• Do you have revenue arrangements with embedded leases where you are
required to separate lease and non-lease components?
• Are the majority of your leases accounted for as operating leases?
• Do you have sale leaseback arrangements?

• Is your existing leasing tool compatible with the new standards?

• Does your existing leasing tool integrate fully with your ERP system?

Assess the technology

Continued...

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 COMPLIANCE CONSIDERATIONS KEY QUESTIONS

• What changes are required for forecasting and budgeting under the new standard?
• What communication plans are required for stakeholders?
• What will be the reporting differences for multi-jurisdictional reporting?
Evaluate reporting implications

• Have you evaluated the process and internal control implications

of the new standard?

Evaluate other implications

• Are you a private or a public company?

• Do you know the deadlines for your type of company?

Develop an • Do you plan on being an early adopter of the standard?

implementation timeline • Are you allocating enough time to the transition in order to meet the deadline?

• How prepared are your third-party vendors for the new regulation?
• Are the leases with your smaller third-party vendors properly formalized?

Recognize data ownership and

third-party involvement

• Do you have the right talent and expertise to manage the transition?
• What training is required for finance and non-finance personnel, including
Manage your resources the board, audit committee, senior management and investors?

• Do you understand the implications of not accurately complying with

the new standard?

Avoid the risk of noncompliance

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SAP Lease Administration by NAKISA® (SLAN)

To effectively address the new lease accounting standards, companies are turning to SAP Lease Administration by
NAKISA (SLAN) because it is the only solution that can effectively manage all types of leases.1 The SLAN solution
is integrated with the SAP core application and manages the full lease lifecycle for lessees, from initiation to
termination of the lease. This includes:

•• Lease determination •• Classification, amortization, accruals and payments*

•• Data capturing •• Event management and workflows

•• Lease agreement and contract management* •• Equipment tracking

•• Assignment of lender, supplier and fixed assets* •• Standard lease-related reporting and
disclosure reporting

* Integrated with SAP

SLAN Solution Offerings

• Designed to provide visibility into your lease and revenue contract exposure
• Single repository for all leases and contracts

End-to-End Lease Management

• Full lease accounting capabilities, from classification, accruals and payments to

disclosure reporting
• Consolidates and captures all lease data, including data necessary for audit trails, in
Accounting and Compliance order to increase efficiency and provide higher return on lease management processes

• Disclosure reporting is compliant with IFRS 16 and ASC 842

• Provides view of the entire lease portfolio from multiple perspectives with dynamic
Analytics and Reporting search and dashboards

SLAN is part of SAP’s package of automated lease solutions, which includes SAP Real Estate Management and SAP Leasing.
1

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Why SLAN?

Using a comprehensive end-to-end solution has a

number of benefits. It allows companies to be scalable
and consistent as they grow and handle complex leases
(e.g., multiple schedules), reduces the risk of penalties
due to noncompliance, provides a global view of all
lease data and the associated impact on financial
statements, and supports statutory lease reporting.

A few of the key reasons companies are choosing SAP

Lease Administration by NAKISA®:

•• Product was developed jointly with SAP with

leases in mind: The solution provides a central
repository for lease contract administration
and lease reporting, thus enabling end-to-end
management and accounting for all leases on
a single platform.

•• Meets SAP premium qualification requirement:

Though there are a number of lease accounting
software products on the market, only a few meet this
requirement, which tests and validates programs for
security, performance, supportability, accessibility
and documentation.

•• Integrates with SAP ERP Central Component (ECC):

The solution provides native integration to the SAP
ECC environment with real-time connectivity.
This eliminates the need to build and support
custom integrations.

•• Is sold and supported by SAP: This ensures that the

product will be supported long-term.

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Why Protiviti?

Protiviti supports companies in meeting their
lease accounting standard requirements beyond
the capabilities that traditional contractors, system
integrators or accounting firms provide. We
bring deep cross-functional expertise in financial
accounting, business process improvement and
systems implementation, among other competencies.
This, combined with our SAP expertise and NAKISA
partner status and access to Robert Half resources
and staffing, allows us to create a uniquely qualified,
comprehensive approach to projects to comply with
the new lease accounting standard and achieve the
necessary business transformation.
staff on these changes, and generate new types
of reporting based on each company’s business
requirements. Protiviti is a leader in financial
and business process optimization, and our SAP
visualization technical experts can support
reporting requirements of any complexity.
System Implementation
As a Gold partner with SAP and a leader in the SAP
compliance and finance community, Protiviti can be
your single qualified partner in the implementation of
SAP Lease Administration by NAKISA®.

We assist companies in the following areas:

Control and Process Documentation and Training
Impact Assessment and Solution Design Large-scale changes to processes and controls require
retraining of individuals and significant amounts of
We perform a gap analysis to understand your current
new documentation and training materials. Protiviti
state and design the road map for implementing SAP
can assist with the development of these materials,
Lease Administration by NAKISA®.
including online learning scenarios, and facilitate
employee training sessions.
Lease Discovery and Data Collection
The initial discovery of all the leases can be a significant Project Management
task depending on the number, locations and variety
The timelines for adoption of the new lease accounting
of leases; whether they exist electronically or on paper;
standard are firm, and companies increasingly are
and other factors. Our proven methodology, combined
becoming aware that the complexity is higher than
with access to experienced resources from our parent
expected. Protiviti can provide project management
company Robert Half, allows us to efficiently identify
expertise and the required compliance, financial and
and capture all data from leases globally.
systems implementation knowledge to successfully
assist companies in meeting the deadline.
Process and Reporting Optimization
To maintain the lease accounting standard over the
long term, companies will need to implement new
financial policies and processes, train accounting

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ABOUT PROTIVITI

Protiviti is a global consulting firm that delivers deep expertise, objective insights, a tailored approach and unparalleled collaboration to help leaders
confidently face the future. Protiviti and our independently owned Member Firms provide consulting solutions in finance, technology, operations, data,
analytics, governance, risk and internal audit to our clients through our network of more than 70 offices in over 20 countries. 

We have served more than 60 percent of Fortune 1000 ® and 35 percent of Fortune Global 500 ® companies. We also work with smaller, growing
companies, including those looking to go public, as well as with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI).
Founded in 1948, Robert Half is a member of the S&P 500 index.
N A K I S A LO G O S - P R O D U C TS H O R I Z O N TA L

CONTACTS

Toni Lastella Aric Quinones Steve Cabello

Managing Director, New York Managing Director, Atlanta Managing Director, Phoenix
+1.212.399.8602 +1.404.240.8376 +1.213.327.1470
toni.lastella@protiviti.com aric.quinones@protiviti.com steve.cabello@protiviti.com

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